Friday, April 21, 2006

This must seem so familiar to the Russians

Assuming that news of the latest Court of Auditors report on the efficacy of the TACIS programme gets any airing in Russia, the people there will shrug their shoulders. This will all seem very familiar to them.

According to a Reuter’s report of the press conference given by Jacek Uczkiewicz, the report’s author:

“The auditors concluded that out of a sample of 29 projects that were completed by the end of 2003 and worth 56 million euros, 12 did not achieve their objectives and eight did so only partially. They judged the results of only five "sustainable."

They highlighted a heating and power project for a city that did not want it and another aimed at harmonising road standards that failed because the EU itself lacked a common standard.”

The only newspaper that seems to have reported the disappearance of billions of euros in that black hole known as the Russian economy is the Times, which, for some reason known to its sub-editors, headlined the article “Gone east: how €7bn EU cash melted away with the Cold War”. Cute but irrelevant. The Cold War had little to do with any of it.

TACIS (Technical Assistance for the Commonwealth of Independent States) is a programme set up by the EU soon after the dissolution of the Soviet Union and the formation of the CIS. Its purpose was to help those states in their transition to a market economy, so far with no beneficial result whatsoever. In fact, one could argue that with President Putin gradually bringing the main sources of Russian income – gas and oil producers – under state control the country has actually moved backwards.

By far the biggest proportion of the money (40 per cent) has gone to Russia and this is what the Court of Auditors has been reviewing.

“The objective of the Court's audit was to assess whether the TACIS projects managed by the Commission in the Russian Federation had been effective, i.e. whether they had achieved their objectives and created a lasting impact (sustainability). The Court examined a random sample of 29 contracts (projects) implemented mainly in 2002 and 2003, i.e. the most recent projects for which the sustainability could be assessed. The total value of the contracts audited was 56 million euro which is more than half of total expenditure on relevant projects.

Overall the Court concluded that nine of the audited projects (29)achieved their objectives. In eight cases the objectives were partially met and in twelve cases they were not achieved. The results of only five of the audited projects were sustainable. The above audit conclusions show that the effectiveness of the use of TACIS funds in the Russian Federation has been very low. Thus the Court cannot assess the performance of TACIS projects in the Russian Federation positively. On the other hand, the audit revealed that the performance of contractors and monitors met the requirements of their contracts.”

We have had a certain amount of jumping up and down from MEPs, especially Hans-Peter Martin, who has, to be fair to the man, been quite active in highlighting corruption and inefficiency in the Toy Parliament as well. But his comments about nobody caring are not entirely true.

The media seems not to care – another €7 billion gone to waste, what a yawn. But there were questions in the past raised by members of the House of Lords about money going to Russia and what controls were provided either by the EU or by the Russian government. The peers who asked the questions were usually fobbed off by meaningless assurances by the government.

Well, now we know the answer: none. Although Mr Uczkiewicz, quite correctly, points out that it was not in the remit of the Court investigation to look at what the Russian government has been doing or not doing, the implication is quite clear: the money was not controlled in any way.

At the end of the summary, there is a curious and completely bland paragraph:

“During the audit, the Court co-operated with the Russian Supreme Audit Institution, the Accounts Chamber of the Russian Federation in the question of methodology. The Russian auditors conducted parallel audits on the use of TACIS funds, examining the performance of the Russian authorities. The Accounts Chamber's report was published in February 2006. The Court intends to publish a common communiqué with the Russian SAI on the parallel audits in the near future. The main aim of the communiqué will be to present the broader picture of TACIS funds performance in the Russian Federation.”

That should make interesting reading.

Of course, one could argue that the idea of spending vast amounts of money by the EU, whose idea of a free market is a score board to be ticked off and about a dozen new regulations every day, on large projects in countries, whose people are used to manipulating such funds for their own benefit was always somewhat faulty.

The problem with all the external EU projects is the same and it is in keeping with the whole institution: there is no accountability (in the literal sense of the word) and no fiscal discipline.

TACIS has been going for 15 years. This is the first time any of it has been audited and only in necessarily general terms. The individual projects are never audited. They do not have to comply with market discipline or those ever more stringent and often impossible regulations that the EU itself (and, let us be fair, the US legislature) inflict on private firms.

It is, of course, particularly delightful that this report should see the light of day just as we are getting daily news or President Putin using economic muscle, largely Russia’s enormous natural resources of gas, to bully politically all around him inside and outside the country. TACIS has, indeed, been a success.